Only 3 in 10 games recover production costs

Former Sony CEO Chris Deering appeared at this week's Edinburgh Interactive Festival, speaking about the video game industry in its current state, and where he sees it going in the near future.

In the opening talk, Deering predicted that by 2011, the global market of potential gamers will have reached 2.5 billion. Splitting this number up by platforms, he puts Nintendo on top with an estimate of 150 million DS owners and 80 million more for the Wii. Sony's very own PlayStation 3 comes in next with an approximate 70 million, while Microsoft's Xbox 360 or its successor will have a following of 40 million.The PS2 will still be in the race with 90 million active users, while the PSP "and/or its sucessors" place at 70 million like the PS3. Of course, these are all predictions, meaning they're not at all definite.

The gaming industry is still high on its rampant success even in the face of declining economies. Even so, Deering warned that "traditional revenue sources will not be sufficient to fund games development" as the market continues to grow, and studios need to explore new business models in order to support themselves. He claims that as of now, only 3 in 10 games earn back their development budgets, and soon companies outside the video game industry will be moving in on its markets.

"Something is going to have to be there to make up the difference," Deering said, citing several ideas of his own. While exciting trends and new technology continue to attract consumers, the industry should be looking to new sources of revenue, such as "creative use of hybrid online/offline advertising" and gambling, which may help support developers indirectly as a new source of income -- it isn't a huge stretch, looking at the addictive nature of both gambling and many video games.

Deering is also encouraging the industry to look at emerging technology and to "make games of" everything, like the internet or "massive mobile social networks."

This age of gaming has made it easier for smaller companies to develop/publish games on their own, but added to that fact is the downside of inexperience, and shooting under the 'standard' for any game genre. Likewise, long-time developer/publisher studios have also sought to utilize smaller, lesser known (cheaper) studios to work on their game titles, effectively lowering the quality of otherwise 'could have been' blockbuster titles.

Even when a game has maintained in-house developement status, reductions in in-house workforces has also resulted in 'weaker' games.

No secret that Namco/Bandai, Konami, and Capcom, once giants, have significantly shot under previous quality margins with what used to be phenomenal game series'.

(Compiled with failing education standards, it's almost pointless to name game names now, with so many ignorant folk wanting to blindly defend a game series - even though they'll never have the ability, or capacity to understand, comprehend, or write up a full fledged review for the game/series they'd so blindly defend)

In any case, the bright get duller, that's just the way it is. That said, with the quickly changing world of the game industry, there's always 'someone' shining brighter.

He places the 360 in last place, when about 60% of console gamers around the world have one. Only about 20% have PS3's.

Thats because 360 was out sooner. He's predicting that, with all the technology in the PS3 (cell processor, blu-ray, extra SPUs) that it will overtake the 360 once developers learn to use its advantages to their potential. Course, by 2011, MS may have the XBox 720 which could have all the abilities of the PS3. I'm not being fan-boyish, I'm just stating the fact that PS3 has an advantage over XBox technologically speaking but the 360 has had more time to sell units and for developers to get used to using it.

I think that the PS3 might catch up, but by 2011 i dont think it will overtake the 360. The PS3 has yet to prove itself in terms of first party games. Until then, good technology or not, the PS3 will be behind the 360.